Buy-to-Let high yield locations...

Alan_M_2

If that is genuinely what you are looking to achieve then your yield needs to be in the region of 10%-15% to cover interest, capital repayment, administration and tax.

7% still falls into speculation I'm afraid, especially when you can get close to 6% in a bank with zero risk.

master_ian

In this market today - is there anyone out there achieving 10 - 15% yields?

I've calculated (conservatively)that with a repayment mortgage and letting to the council they can guarantee about 5 - 6% yield with no void periods, no commission, no admin costs, and a maintenance call out service. This is over 5 years, then I can register to re-apply for the scheme again. I'm willing to risk a dip in house prices as Alan M mentioned correctly not to take past performance as the norm, which is why I'm here to seek out advice on locations which can generate a sound investment/good return as possible in terms of both rental income and capital growth.

So, yes, we are taking a risk. It's a choice. Otherwise, our deposit would be locked up in a nice, safe savings account.

I suppose if the market crashes and stays crashed for 10 years, then I'll truly be ******!

Will_it_make_me_rich

Well, when you have money to invest many people consider different options open to them. That way that can judge whether one thing might be better for them than another. For instance I am not bothered by what will be in 30 years because I expect to be pushing up daisies but if I was in my 20s or 30s I might well be thinking differently. Yield is just a measure that allows you to compare investments

I forget that these message boards you can be talking to someone of any age.
I'm not sure if I would invest in BTL's if all I was concerned with was income.
My first year of being a LL I made losses of £400ish this was mainly do to manatory electrical work needed.
Now something that is interesting is I was thinking of selling the BTL because house prices have only risen .4%. Where 20 miles away they have risen 7.3%.
However my yield is 7.2% I don't know what the yield is like 20 miles away.

Alan_M_2

master_ian wrote:

In this market today - is there anyone out there achieving 10 - 15% yields?

I've calculated (conservatively)that with a repayment mortgage and letting to the council they can guarantee about 5 - 6% yield with no void periods, no commission, no admin costs, and a maintenance call out service. This is over 5 years, then I can register to re-apply for the scheme again. I'm willing to risk a dip in house prices as Alan M mentioned correctly not to take past performance as the norm, which is why I'm here to seek out advice on locations which can generate a sound investment/good return as possible in terms of both rental income and capital growth.

So, yes, we are taking a risk. It's a choice. Otherwise, our deposit would be locked up in a nice, safe savings account.

I suppose if the market crashes and stays crashed for 10 years, then I'll truly be ******!

Many people who bought 5 + years ago will be comfortably into double figure yields, hence my original comment about missing the boat.

I'm reasonably confident Mystic_Trev will be in this region (having never seen his figures) because He bought some time ago. Remember this is yield to the amount invested (the mortgage + deposit) not the value of the property.

Mrs_pbradley936

Will_it_make_me_rich wrote:

INow something that is interesting is I was thinking of selling the BTL because house prices have only risen .4%. Where 20 miles away they have risen 7.3%.
However my yield is 7.2% I don't know what the yield is like 20 miles away.

Put the postcode into rightmove.com and do a rental search. If you register (its free) you will be able to see all the sold for prices in any postcode for the last 6 years.

Mrs_pbradley936

Well I think my yield is 13.5 % I worked it out as follows:

Cost of property 60K
Monthly rent 675
Annual rent ( 675 x12) 8100


(8100 ÷ 60K) x 100 = 13.5


If my maths is wrong or if you do not calculate yields like this someone please let me know.

Alan_M_2

Yup, that's how I arrive at them.

I'm sure there's a little more to it when you take into consideration interest on the loan to buy the place to start with, but it's a simple calculation that tells you if you're making money or not - and that's all it needs to be.

Do the same calculation on the current value of the property -it probably wouldn't be a viable investment.

Will_it_make_me_rich

Do the same calculation on the current value of the property -it probably wouldn't be a viable investment.

I get 5.6%

RHemmings

Alan_M wrote:

Many people who bought 5 + years ago will be comfortably into double figure yields, hence my original comment about missing the boat.

I'm reasonably confident Mystic_Trev will be in this region (having never seen his figures) because He bought some time ago. Remember this is yield to the amount invested (the mortgage + deposit) not the value of the property.

But that's the wrong way to calculate yield. You should calculate yield based on the current value of the property, not the purchase price.

Think of it this way, if you sold the property and put the money in the bank, would you be getting interest calculated on the original price of the property, or its' current value.

Another way to think about it, if you had £100K in a bank account, and it was getting 5% a year, then if the interest was being paid back in to the account (and with housing, increases in value are part of the return), then after the first year you'd have £105K (or a bit more if the interest is calculated more often). When calculating how much interest you're going to get in the second year, do you calculate it from the original £100K, or the £105K that's in the account now?

Alan_M_2

RHemmings wrote:

But that's the wrong way to calculate yield. You should calculate yield based on the current value of the property, not the purchase price.

Think of it this way, if you sold the property and put the money in the bank, would you be getting interest calculated on the original price of the property, or its' current value.

Another way to think about it, if you had £100K in a bank account, and it was getting 5% a year, then if the interest was being paid back in to the account (and with housing, increases in value are part of the return), then after the first year you'd have £105K (or a bit more if the interest is calculated more often). When calculating how much interest you're going to get in the second year, do you calculate it from the original £100K, or the £105K that's in the account now?

Correct if there is no outstanding loan on the property.

However I'd hazard a guess this isn't the case in say - 80% of BTL's so the relevant figure is then based on the value of the property the day the loan was drawn down. After all, if you own a £250,000 property with a £125,000 mortgage, you don't have £250,000 to plonk in a bank account if you sell - you have £125,000.

You've just not taken into account the effect of borrowed money on the calculations.

So comparing Yield to a bank account you have to remove the existing debt from the value of the property to arrive at a true figure. i.e - what would the yield be on the equity, not the total value.

However, now you've highlighted how much you can earn from a zero risk investment you'll understand why the professional investors who own without debt are now disposing of their let properties.